Only 15% of households that managed to hoard more money during the previous crisis have “unsaved” part of that capital, according to the Bank of Spain.
The festival of consumption isn’t as dynamic as the images of the streets, shops and restaurants over the past long weekend seem, or at least not as much as consumption could evolve this year’s end after the austerity families have made during the pandemic built up . Most households that managed to accumulate more money in the middle of the corona crisis have decided to leave it intact. And “only 15% of households that increased their savings with the onset of the health crisis would later be “dissaved”.
This “one” pointed out by the Bank of Spain reveals the lower dynamics of domestic consumption than both the institution itself and the rest of national and international organizations expected in household spending for this year that is about to end. Families are much more careful with their money than estimated, and what the Spanish economy would need to keep growing. The impact of inflation, resulting in a loss of broad purchasing power, as well as the fear of 2023 influence decisions about a purchase or acquisition.
The Bank of Spain points out in its study on savings that the number of households that have used that money to spend more represents a “relatively small” group. During the highest incidence phases of the pandemic, households have built up a large piggy bank, mainly due to the difficulties they experienced in consuming some goods due to the restrictions and especially the services that were part of their basket of ordinary consumption . In particular, it points out that Spanish household savings between January and September 2020 were almost percentage points of GDP higher than average in the first three quarters of the previous five years.
Although the reliance of these households on the assets they had previously accumulated would have enabled them to follow a more dynamic consumption path than that of the rest of households, given the small size of this group of households, this situation would not have to a “very significant” boost to overall spending levels, says the Bank of Spain.
The regulator also concludes that households that have saved during the pandemic do not expect greater dynamics in their consumption, over an annual horizon, than households that had not saved.
Looking ahead to the coming months, the excess savings accumulated during the pandemic, whose value in real terms would have already fallen “significantly” in recent months due to price increases, are not expected to make a very significant contribution to the total household consumption in the coming quarters.
This situation is due to the fact that most of the savings surplus accumulated during the pandemic is concentrated in high-income households, which have a lower marginal propensity to consume. It also influences the fact that the “significant uncertainty” that characterizes the current geopolitical and macro-financial situation would have led to more precautionary savings, at least in the short term.
In addition, the sharp increase in the cost of debt in recent months could also prompt households to spend part of their accumulated savings, rather than consumption, on repaying loans.
“To sum up, according to the evidence presented in this box, the use of the piggy bank accumulated by Spanish households at the start of the pandemic would have had a relatively modest impact on the development of total consumption at present,” emphasizes the Bank of Spain, adding that several factors indicate that in the coming quarters said accumulated savings are not expected to boost household spending very significantly.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
